The Covid-19 pandemic has brought the whole world to its knees. More than half the world’s population is under some kind of shelter in place order. Airlines are grounded. Freeways have only essential traffic moving. Downtowns have become ghost towns. Unemployment is at a record level, and a severe recession is likely upon us.
As a small entrepreneurial business, you probably have already made difficult decisions in terms of personnel, expenses, inventory, etc. What to do now? As your business activity has slowed down, now is the time to rethink your business model. You need to evolve, adapt, survive, and eventually thrive.
Your business model describes the following four aspects of your business:
- What is my customer value proposition, i.e. what value do I create?
- How do I create this value? What resources am I using (people, technology, physical assets, etc.) to create this value?
- How do I deliver this value? What customer segments am I addressing? What channels of distribution am I utilizing? What kind of relationship do I have with my customers?
- How do I monetize this value? What is my cost structure? What are my revenue streams?
These four dimensions are reflected in the Business Model Canvas:
Each one of these value questions needs to be examined afresh in light of the pandemic.
This is the reason you are in business. You provide a unique value proposition for each of your products or your services to your customers. Think about what “job” is your product doing for the customer. Can it be done differently? More economically? Can the value proposition be altered in light of the pandemic? How can you delight a home-bound customer?
Your business creates value through three key aspects, all of which need to be reimagined.
Your network of suppliers and service providers is in the same boat as you. They are short on cash and they need your business. This is the time to strike new deals that establish a long-term road to recovery for both you and your partners.
The restrictions on the movement of people and goods are forcing businesses to examine their key activities. This is where remote networking technologies such as video conferencing play a key role. Forget physical meetings with your suppliers and employees. A video call, followed by frequent email contact, is perhaps a better use of your and your team’s time.
Think lean. What can you do without, while not affecting the quality of the product or service you offer? Could you provide similar levels of service with fewer employees? Now is the time to try.
This is where the rubber meets the road, so to say. Your customers are sheltering in place. How will you deliver value to them?
Knowing that almost all of your customers are under severe travel restrictions, it’s time to rethink your customer segments. If you thought of business customers in office buildings and at-home customers as two separate segments, now is the time to combine them.
If you have a retail store, it is time to invest in curbside delivery, as well as establishing partnerships with delivery services. Move your store online. Customers have already migrated there.
It is time to rethink your relationship with your customers. They will likely not be visiting you at your place of business. You need to reach out to them online. Send them frequent emails with offers and insights on how to navigate during the pandemic.
Your cost structure and revenue streams define this segment. It’s time to optimize both.
If real estate is a part of your cost structure, it is time to renegotiate your lease, or even think about whether you really need the office space? Shared office spaces are going to be a problem due to social distancing requirements. If your employees can work from home, utilizing video conferencing such as Zoom or WebEx, messaging such as Slack or Microsoft Teams, and plain old email, why not save the money on physical infrastructure. You have probably already pared down your headcount. It is time to think about using outsourced services as much as possible, without sacrificing quality.
Are your revenue streams reflective of the value you provide to the customers? Have you been adding services without charging for them? Instead of a one-time sale, can you move to a subscription model? Software-as-a-Service has replaced boxed software sales. Think about what else you could offer as a service. Uber and Lyft offer transportation as a service. Grubhub and Doordash provide dining as a service.
A Recession as an Opportunity?
It sounds crazy, but many enduring companies were created during a recession, or just before an oncoming recession. For example, GE, GM, HP, Microsoft, and Apple were launched during recessions. Google and Facebook were launched just before a recession. A recession forces us to think hard. Lack of resources drives creativity. Don’t let the difficult times get you down. It’s time to sharpen the saw and think about new ways of creating value. We can help you every step of the way.